Italian May Business Confidence Unexpectedly Gains
Italian business confidence rose for the first time in seven months in May after Silvio Berlusconi won the April national election and manufacturers' orders improved, lifting the prospects for higher production.
The Isae Institute's business confidence index rose to 89.6, the highest since February, from a revised 87.6 in April, the Rome-based research center said today. That was the biggest monthly increase in more than a year and more than the median forecast of 86.9 in a Bloomberg News survey of 19 economists.
“The prospect of government stability and expansive economic policy could have helped confidence,'' said Paolo Mameli, an economist with Intesa Sanpaolo SpA in Milan. “In the long term, business confidence isn't going to hold up as growth remains near zero.''
The survey was conducted less than a month after Prime Minister Berlusconi took power for a third time on promises of tax cuts. Rising business confidence in Italy reflects growing optimism in Germany, its biggest trading partner. German gross domestic product accounts for about a third of the output of the entire 15-nation euro-region and grew at the fastest pace in 12 years in the first quarter.
Confidence in Germany
“Confidence is bouncing back a little, but it won't be sustainable,'' said Paolo Pizzoli, an economist at ING Bank NV in Milan. “When Germany's economy slows, it's going to hurt Italy.''
German growth is helping to offset the effect of a strong euro and rising energy costs, Pizzoli said. Germany's Ifo survey unexpectedly rose to 103.5 in May from 102.4, according to a May 21 report. German GDP grew 1.5 percent in the first quarter. Italy grew 0.4 percent in the first quarter, twice the pace forecast by a Bloomberg survey of economists free credit report instantly.
“The data is in line with what recently emerged from the Ifo survey of German manufacturers,'' Isae said in a statement. “Businessmen are more optimistic about demand, especially foreign demand, and the outlook for production.''
While Italy's economy may not be as bad as expected, the German economy is outperforming its partners. French business confidence declined to its lowest in more than two years in May, sliding to 102 from 106, according to an Insee report published today. Spain's economy expanded at its slowest pace in almost 13 years in the first quarter.
Zero Growth
After predicting zero growth in 2008, Berlusconi this month eliminated a property tax and trimmed levies on overtime pay as one of the first acts of his government. Italian growth is forecast to lag behind the rest of the countries sharing the euro for a 12th year in 2008, according to the European Commission.
A measure of total orders rose to minus 16 from minus 18 in April, and the three-month outlook for production rose to 14, the highest since November, from 9 in April. An index of foreign orders rose to minus 16 from minus 20.
The euro rose to a record high against the dollar this year, making European goods more expensive in the U.S. The surge in oil prices — crude has risen 38 percent this year and reached a record of $135.09 on May 22 — is raising production costs and stifling consumer spending, which accounts for two thirds of Italy's $2.3 trillion economy.
Isae conducted its survey of 4,000 companies between May 2 and May 20.
Filed under: news by Forest